In November 2005, PLATFORM published Crude Designs, an unprecedentedly detailed study of Big Oil's plan for exploiting Iraq's oil wealth.  --  As the press release announcing the study says, this is the first study to attempt to calculate the cost to the Iraqi people of the oil contracts being forced upon them.[1]  --  "Control of Iraq's future oil wealth is being handed to multinational oil companies through long-term contracts that will cost Iraq hundreds of billions of dollars."  --  No wonder the resistance to American plans is considerable.  --  The Bush administration's plans for Iraq, of course, are predicated on the notion that most Americans and Iraqis are too thick to be able to see the arrangements described here for what they are: a design to rip off Iraq's oil wealth.  --  Primarily the work of researcher Greg Mottiett, the study is called Crude Designs: The Rip-Off of Iraq's Oil Wealth. -- While a clever pun, this title is not really accurate, since the U.S. plan is anything but a crude one.  --  Perhaps Refined Design would have been a better title.  --  The third part of the PLATFORM study, presented below, explains other, fairer approaches to exploiting Iraq's oil wealth, and presents the report's conclusion.[2]  --  (See the original link for four technical appendices and a bibliography.)  --  PLATFORM is a 20-year-old London-based group of activists, environmentalists, artists, and social scientists working on issues of social and environmental justice; in recent years, the group has concentrated on the role of British companies in the global hydrocarbon economy....

1.

Unraveling the Carbon Web

CRUDE DESIGNS -- THE RIP-OFF OF IRAQ'S OIL WEALTH

Platform
November 2005

http://www.crudedesigns.org/

Control of Iraq's future oil wealth is being handed to multinational oil companies through long-term contracts that will cost Iraq hundreds of billions of dollars.

Crude Designs: The Rip-Off of Iraq's Oil Wealth reveals that current Iraqi oil policy will allocate the development of at least 64% of Iraq’s reserves to foreign oil companies. Iraq has the world’s third largest oil reserves.

Figures published in the report for the first time show:

--the estimated cost to Iraq over the life of the new oil contracts is $74 to $194 billion, compared with leaving oil development in public hands. These sums represent between two and seven times the current Iraqi state budget.

--the contracts would guarantee massive profits to foreign companies, with rates of return of 42% to 162%.

The kinds of contracts that will provide these returns are known as production sharing agreements (PSAs). PSAs have been heavily promoted by the U.S. government and oil majors and have the backing of senior figures in the Iraqi Oil Ministry. Britain has also encouraged Iraq to open its oilfields to foreign investment.

However, PSAs last for 25-40 years, are usually secret, and prevent governments from later altering the terms of the contract.

2.

Crude Designs: The Rip-Off of Iraq's Oil Wealth
By Greg Mottiett
November 2005

http://www.carbonweb.org/documents/Crude%20Designs%20report%20-%20final.pdf

6. A BETTER DEAL: OPTIONS FOR INVESTMENT IN IRAQ'S OIL DEVELOPMENT

A central question for Iraqi planners and politicians is how to invest in the country's oilfields -- revenues from which will provide the central plank of the Iraqi economy for the foreseeable future. In the last section we saw, by looking at common practice elsewhere in the world, that investment through production sharing agreements (PSAs), would be likely to come at considerable cost to Iraq.

A RADICAL DEPARTURE

Much as their proponents like to claim that PSAs are standard practice throughout the world’s oil industries, in fact International Energy Agency figures show that just 12% of world oil reserves are subject to PSAs, compared to 67% developed solely or primarily by national oil companies. [Note 72: Dunia Chalabi (International Energy Agency), "Perspective for Investment in the Middle East/North Africa Region," Presentation to the OECD, Istanbul, 11-12 February 2004, p. 7] Thus it is far from inevitable or necessary that PSAs must be used in order to obtain investment in Iraq’s oil development. PSAs are often used in countries with small reserves; however the nationalized model is almost exclusively used in all countries with very large oil reserves.

The use of PSAs in Iraq would represent a major departure from common practice among the large oil producers of the region. Iraq and three of its neighbors (Saudi Arabia, Iran, and Kuwait) are the world’s top four countries in terms of oil reserves, with 51% of the world total between them. [Note 73: BP, op. cit., p. 4] None of them use any form of foreign company equity involvement in oilfields.

Looking further afield, these four Gulf states together with the United Arab Emirates, Venezuela, and Russia, hold 72% of the world’s oil reserves. These latter three all have some foreign involvement in their oil industry, although both Venezuela and Russia are currently drawing back from it, following unsuccessful expansions in foreign investment in the 1990s. Of these seven countries with major oil reserves, only Russia has any production sharing agreements. In the Russian case, three PSAs were signed in the mid 1990s; they have been the subject of extreme controversy ever since due to the poor deal the state has obtained from them, and it now looks unlikely that any more will be signed.

[Inset: TABLE 6.1: FOREIGN INVESTMENT IN THE WORLD’S MAJOR OIL RESERVES: Reserves (billion barrels) end 2004 [Note 74: Putting energy in the spotlight -- BP Statistical Review of World Energy June 2005]/Share of world total reserves/Foreign company equity investment?/PSAs?: Saudi Arabia: 262.7/22.1%/No/No; Iran: 132.5/11.1%/No/No; Iraq 115.0/9.7%/No/No; Kuwait: 99.0/8.3%/No/No; United Arab Emirates: 97.8/8.2%/Yes/No; Venezuela 77.2/6.5%/Yes [Note i: In Venezuela, the apertura policy of 1993-8 to allow foreign oil companies in is now being reversed.]/No; Russian Federation: 72.3/6.1%/Yes [Note ii: Russia also saw massive expansion of the private sector’s role in the 1990s; the trend is now in the opposite direction.]/Yes [Note iii: Only three PSAs have been signed, all during the rapid post-Soviet liberalisation of the early-mid 1990s. PSAs are now highly controversial, and no more are likely to be signed.]; TOTAL: 856.6/72.1.]

[PHOTO of riverside urban scene of dilapidation CAPTION: After 50 years of rip-off by foreign companies and over 20 years of war, Iraq needs the right policies to develop its oil industry.]

OPTIONS FOR INVESTMENT

One argument that is deployed by proponents of PSAs is that Iraq has no other option to generate the capital investment needed to rebuild and expand its oil industry. This is simply not true. In fact Iraq has at least three options for generating investment in its oil industry, without giving away its revenue and control over the industry:

1. Direct investment from government budget.

2. Government/state oil company borrowing from banks, multilateral agencies and other lenders.

3. Investment by international oil companies using more flexible and equitable forms of contract.

It is not the role of this report to advocate any particular structure for the Iraqi oil industry, nor to advocate for or against the use of foreign investment. That decision rests with the Iraqi people. However, in this section we briefly explore each of these options, all three of which are superior to PSAs in terms of consequences for the Iraqi economy and people. First, it should be stressed that there is considerable technical competence among Iraqis themselves and foreign companies are not required to manage the industry. Indeed, the most successful period in the history of Iraq’s oil industry was between nationalization in 1972 and the start of the first of Saddam’s wars with Iran in 1980. Freed up from the foreign interference that had unhappily characterized Iraq’s previous petroleum history, the Iraq National Oil Company moved forward confidently and effectively: between 1970 and 1979, INOC increased production from 1.5 million to 3.7 million barrels per day and discovered the four super-giant fields West Qurna, East Baghdad, Majnoon and Nahr Umar [Note [a]: Now renamed Bin Umar], and at least eight giant fields. In some areas, the state of Iraqi knowledge may not be the most up-to-date, because of the sanctions era. However, this is easily solved within any of the above models by employing specialist companies under short-term technical service contracts to provide drilling and production expertise when required. Thus what is at issue is how capital is obtained, not skills.

OPTION 1: FINANCING FROM GOVERNMENT BUDGETS

The simplest model would be for the required investment to be provided each year out of government budgets. This is quite possible and appropriate in Iraq’s case, because in contrast to many other countries:

--The development cost is low when compared to the return;

[Inset: THE NEED FOR TRANSPARENCY

Ensuring that Iraq's oil wealth benefits the majority of Iraqis is not only a question of the contracts themselves. Appropriate development also depends on good governance.

There are very few oil-producing countries that have managed to prevent corruption in their oil sectors, and Iraq is no exception. Indeed, during the three decades of national control over the industry, Iraq’s oil wealth was used to sustain a brutal dictatorship and its internal security apparatus, to personally enrich Saddam Hussein and his family, and to finance devastating wars with Iraq’s neighbors. Meanwhile, corruption became endemic at all levels of Iraqi officialdom.

Corruption is already a problem in post-Saddam Iraq. Investigations by U.S. and international agencies into the financial operations of the Coalition Provisional Authority and Iraq's interim governments have concluded that billions of dollars have been lost due to corruption, theft, and inadequate accountability. The vast majority of that money, estimated to be at least $4 billion, was derived from Iraq's oil income, which was meant to be invested in the reconstruction of the country. [Note 85: Ed Harriman, "Where Has All the Money Gone?," London Review of Books, Vol. 27 No. 13, 7 July 2005; Iraq Revenue Watch, "Audits Find More Irregularities and Mismanagement of Iraq's Revenues," December 2004]

Whether Iraq’s oil is held in the public or the private sector, good governance and effective democratic institutions will be essential. In order to prevent the emergence of another Saddam, it is particularly important to curb the discretionary power of the executive over oil income and expenditure. It is also necessary to ensure that adequate oversight powers are given to appropriate government bodies and that transparency is enshrined in law. [Note i: For more on this, see http://www.publishwhatyoupay.org -- website of the Publish What You Pay coalition of over 280 civil society organizations.] Furthermore, all oil income and expenditure must be included in a transparent and accountable budgetary process. Auditors should report to parliament and parliamentarians should be able to call ministers and senior officials to account. No national reserve fund should be allowed to be used as a “slush fund.” [Note 86: Iraq Revenue Watch, Protecting the Future: Constitutional Safeguards for Iraq's Oil Reserves, Report No.8, May 2005] These challenges are enormous in Iraq. However, the insistence by the United States, the oil industry, and their allies on constitutional and contract terms favourable to foreign investors with minimal state regulation, is likely to hinder, not help, transparency and accountability. Although civil society around the world is now pressing for disclosure of contracts, with some initial successes [Note ii: Such as in Azerbaijan -- legal agreements were unavailable until civil society pressed for them to be published. After which BP posted its agreements on its website http://www.caspiandevelopmentandexport.com], confidentiality remains the norm. Minimum requirements for any form of contract must be the prohibition on non-disclosure clauses and the publication of the contracts themselves. [Note 87: Publish What You Pay objectives -- http://pwyp.gn.apc.org/english/objectives/] Even then, PSAs present serious difficulties: as this report has already shown, their complexity makes them notoriously difficult to monitor.

The attitude of multinational oil companies can also be unhelpful. Corruption problems often arise from the ‘ultra-presidential’ status of the executive and Iraq Revenue Watch warns: “Foreign influence also has had a hand in promoting ultra-presidential systems. During the 20th century, companies mainly preferred to deal with one “negotiator,” either the president or his representatives, and the executive branch in many resource rich countries grew all-powerful as oil rents flowed through it. As foreign oil companies engage in more business with Iraq’s nationalized oil industry, Iraqis must be vigilant to the potential role of those companies in encouraging an ultra-presidential government.” [Note 88: Iraq Revenue Watch, Protecting the Future, op. cit.]

The emerging lesson from the growing body of evidence of the ‘resource curse’ -- where countries with natural resources such as oil suffer high levels of corruption, and even (paradoxically) economic decline, is that before massive influxes of capital or oil revenue, it is necessary to have in place the institutions to manage them and an economic base that is broader than sole reliance on the oil economy. [Note 89: See e.g. Striking a Better Balance: The World Bank Group and Extractive Industries, Final Report of the Extractive Industries Review Vol. 1, pp.12-16 and 45-52] In this context, it is precisely the speed of Iraq’s opening to the oil multinationals, with rapid change and a lack of clear governance structures, which is likely to create the conditions for corruption and economic failure.]

As a consequence, the payback period is very quick;

--Since there are considerable proven but currently undeveloped oil reserves, risk to capital is very low (as no exploration is required for immediate field development). In the longer term, Iraq will explore but even this is relatively cheap and low-risk. Iraq's investment requirement is expected to peak at around $3 billion per year. [Note 75: Oil Ministry figures give an investment requirement of $25 billion over ten years. In our economic models, the investment peaks at $3.0 bn in 2012 (the fourth year of development). However, in the models first oil is expected in 2011 -- thus this will contribute to the 2012 investment. The highest annual net investment in the models is $2.3 billion, in 2011.] This is well within the range of current budgetary allocations: the 2005 Iraqi oil investment budget is $3 billion [Note 76: International Oil Daily, "Iraqi Oil Ministry Gets Big Leap in Funds," 26 October 2004] (out of a total Iraqi budget of around $30 billion).

Furthermore, within at most three years from the start of development, revenues from new production would well exceed the ongoing investment requirements, and could therefore provide this finance. In other words, at worst Iraq would have to invest $2.-3.0 bn of its existing budget for three years.

One argument commonly advanced in favor of foreign investment in Iraq’s oil is that it would save government budgetary expenditures for other priority areas. For example, the British Foreign Office argued in 2004, in a Code of Practice issued to the Iraqi Oil Ministry: “In the absence of a very high oil price, Iraq would only be able to finance this investment [in oil development] itself if it could secure a very generous debt reduction deal and was prepared to make substantial cuts in government expenditure in other areas. Given Iraq's needs, it is not realistic to cut government spending in other areas, and Iraq would need to engage with the International Oil Companies (IOCs) to provide appropriate levels of Foreign Direct Investment (FDI) to do this.” [77 FCO, Code of Practice, op. cit. p. 4]

In other words, if Iraq pursued the option of direct financing, the amount of money invested from the government budget would no longer be available for schools, hospitals, roads, etc. Economists say that this capital has an opportunity cost. However, the use of discounting techniques (see Appendix 2) is precisely designed to allow for the opportunity cost of capital. In the previous section, we saw that, having considered this opportunity cost by discounting, the Iraqi government is still better off investing its own money. The (2006) net present value lost by the

Iraqi state as a result of adopting the PSA policy would be between $16 and $43 billion, at 12% discount rate.

This shows that, in purely economic terms, the policy is bad for Iraq. However, the choice of what development path to follow -- whether to develop more quickly now, or to build steadily for the long term -- is ultimately a political one. As such, this decision should be made by the Iraqi people; but it should be made with a full understanding of the economic implications. In the previous section, we found that companies could expect rates of return on their investment of between 42% and 162%, depending on the field characteristics and the PSA terms. These rates of return can also be seen as the cost of the capital to the state if Iraq decides to use the PSA financing route.

When looking at it in this way, it is helpful to put all 12 fields together and consider them as a single investment. In this case, we get ‘company’ internal rates of return of:

Libya PSA terms: 75% Oman PSA terms: 91% Russia PSA terms: 119%.

The financial structure of PSAs versus bank loans are different, so these are not directly equivalent to bank interest rates. However, by comparison with bank rates, we can see that the cost of PSA capital would be huge and could not justify the political considerations outlined above.

OPTION 2: GOVERNMENT / STATE OIL COMPANY BORROWING

An alternative option would be for state oil companies (or the government) to borrow the money, either as

1. loans from banks, using future oil production as collateral;

2. concessionary loans from multilateral agencies, such as the World Bank; or

3. the issue of government bonds.

As with the direct funding option above, the low cost of development and quick payback make this quite an attractive option.

Helmut Merklein, a former senior official of the US Department of Energy, comments that the foreign investment/PSA approach, “would be like securing a $300 loan by pledging a fully paid-for $300,000 residence as collateral. In contrast he notes: “With that kind of collateral, there will be no shortage of commercial or governmental (bilateral or multilateral) credit institutions eager to supply the required capital needed to rehabilitate oil production in Iraq.” [Note 78: Helmut Merklein, op. cit. In this comment, Dr. Merklein is actually referring to the smaller cost of rehabilitating production to pre-Gulf War levels; but the same applies to the larger investment, too]

Muhammad Ali Zainy, an expert on Iraqi oil at the Center for Global Energy Studies, looks specifically at the Majnoon field as an example, noting that: “If INOC [Iraq National Oil Company] borrows the $3 billion amount to be repaid over 20 years at 10% interest compounded annually, the debt service (principal and interest) would be around $352 million/year, or around $1.6 per barrel per day. . . . [Combining this capital cost with production and transportation costs] the total FOB [Note [b]: Freight on Board -- the price quoted for oil loaded onto a tanker in the export port.] cost to INOC would be $3.5 per barrel. If this oil is sold at $35 per barrel, the rent to INOC would be $31.5 per barrel. With these prices and costs, it should not be very difficult for INOC to borrow from the banks, with incremental oil as the collateral.” [Note 79: Dr. Muhammad Ali Zainy (Energy Economist and Analyst, Centre for Global Energy Studies), at the 10th Annual Energy Conference of The Emirates Center for Strategic Studies and Research (ECSSR), 26-27 September 2004, Abu Dhabi, UAE, reproduced in Middle East Economic Survey, 47:42, 'Iraq's Oil Sector: Scenarios For The Future', 18 October 2004]

What is unclear at this stage is how such an approach would interact with Iraq’s existing national debt -- the largest (relative to GDP) of any country in the world.

The International Monetary Fund is expected to issue a Standby Agreement, setting out conditions with which Iraq will have to comply in order to receive some debt relief, by the end of 2005. It is unknown whether this will place restrictions on Iraq’s future borrowing. The IMF recognizes the need for investment in Iraq’s oil sector but the IMF is also infamously keen on pressuring countries to privatize their industries.

There is similarly a question of whether commercial lenders would be deterred by Iraq’s high level of debt. Their decision will depend in particular on what agreements are made on repaying the existing debt. In any case, the points made by Merklein and Zainy, above, are convincing: given the huge scale of the available rents [Note [c]: Rents are defined as the surplus revenue after costs and a reasonable return on capital are deducted (i.e. excess profits)], and the corresponding potential collateral (from future oil production), it would seem to be more a question of negotiating the right terms than of finding a lender willing to participate. Furthermore, in light of the priority given by the international community to rebuilding Iraq, lowercost loans from the World Bank or other multilateral agencies should also be an option. There is a very strong case, being made by the Jubilee Iraq network [Note: 80 www.jubileeiraq.org] and others, that the bulk of Iraq’s debt should be treated as odious debt. That means that the debt was incurred by Saddam Hussein without the consent of, and not for the benefit of, the Iraqi people. Rather, he used it to fight wars and to finance internal repression. Thus, it is argued that the people of Iraq bear no legal or moral responsibility to repay that debt. [Note 81: 81 See e.g. Justin Alexander, "Saddam's Odious Debt," Swans Commentary, 2 February 2004, http://www.swans.com/library/art10/iraq/alexander.html Also, Economist, "Those Odious Debts," 18 October 2003: "The Iraqi debt problem highlights a huge unresolved flaw in the international financial system. There is an overwhelming case, both in terms of economic expediency and justice, for writing off most of Iraq's debts, and doing so fast . . . It is clearly unfair to expect the Iraqi people to pay for the reckless waste of the regime that brutally oppressed them for so long."] Were this argument to be accepted by the Iraqi authorities, international borrowing could be quite straightforward. As the Wall Street Journal pointed out: “We wouldn't blame (Iraq’s) leaders if they decided that some of those financial obligations are indeed odious. And given that this is such an extreme case, international lenders probably wouldn't hold it against them for long.” [Note 82: Wall Street Journal, editorial, 30 April 2003, quoted in Jubilee Iraq, "Saddam's Odious Debt -- Iraqis Address the Paris Club," November 2004]

In any case, it is noteworthy that even the strongest advocates of PSAs -- including corporate lobby group ITIC, the British government, and Iyad Allawi -- seem to accept that borrowing is an option. [Note 83: See for example, ITIC, Petroleum and Iraq's Future, op. cit., p. 6; FCO, Code of Practice, op. cit. p. 5; Iyad Allawi guidelines on oil policy, reported in Middle East Economic Survey, 47:37, 13 September 2004, p. A2.]

OPTION 3: MORE EQUITABLE AND FLEXIBLE CONTRACTS?

Iraq’s neighbors Iran, Kuwait, and Saudi Arabia have recently allowed some limited foreign investment in their oil and gas industries, although in a very different way from PSAs. They have used alternative contractual options such as risk service contracts, buyback contracts, or development and production contracts. Each of these contractual forms allows a foreign company to provide investment in an oil development, but gives it no direct interest in the oil produced. The oil remains with the state and the company is paid as the state’s contractor. As such, these contracts can be seen as modifications of the technical service contract to allow investment.

All three give operatorship of the field to a foreign company, but with much more limited rights, and in the case of buybacks and DPCs, for a much more limited period of time than PSAs. Importantly, in all three contract types, the foreign company does not have the opportunity to make excessive profits, as it is paid either a fixed fee or a fixed rate of return. Obviously any form of external financing has a cost. Indeed, even with the borrowing option above, Iraq will have to carefully consider the terms of any loan, and its future implications [Note [d]: See for example, the 'Drilling into debt' report by Oil Change International, which finds that oil-producing countries tend to experience major indebtedness.] Iraq should be careful not to tie its hands, either through contracts, or through collateral arrangements. The challenge will be to weigh the advantages of freeing up government funds against the cost of the finance.

We have seen that if Iraq’s oilfields are developed by foreign companies under PSAs, the cost to Iraq’s economy will be enormous. We have also seen that PSAs would give considerable control away to the multinationals for many decades. It is in these respects that buyback, risk service or development and production contracts may be preferable for Iraq. For the same reasons, the oil companies argue that such forms of contract are not sufficiently appealing to them (not profitable or wide-ranging enough) to justify their investment. [Note 84: For example, ITIC, Petroleum and Iraq's Future (op cit), pp.30-31: "For the most part, international oil companies do not favor risk service contracts. Such contracts have sometimes been accepted as an interim measure, or a cost of access, on the route towards eventual creation of a PSA regime. Typically risk service contracts offer relatively low returns and present difficulties for companies in booking reserves." ITIC indicates reluctant acceptance of development and production contracts, but indicates a strong preference for PSAs] In large part, this is a negotiating position -- inevitably, companies will downplay their interest in order to get a better deal.

Even if it is true to some extent, Iraqi negotiators should not be pushed into accepting terms that are not in Iraq’s interests. In the previous section of this report, we have shown how damaging PSA deals would be; in this section, we have tried to show that other options are available. If the oil companies will not sign fair contracts, then Iraq can develop its oil industry without them.

[Inset: ALTERNATIVE CONTRACT TYPES

Algeria has made significant use of a mechanism known as the Risk Service Contract. In this model, a foreign company invests capital, and when production begins is reimbursed their costs (from oil sales), plus generally a fixed fee per barrel of oil produced. [Note i: The term “risk service contract” is slightly ambiguous -- it is alternatively sometimes taken to mean the equivalent of a PSA, but where revenues are shared (in cash), rather than production itself.] The company can thus increase its profits by increasing the rate of production; on the other hand, the company carries the risk that the venture will fail (especially where exploration is involved). This model may also be used in Kuwait’s opening to investment of four of its northern oilfields (Project Kuwait), which is still under parliamentary debate. In the 1990s, Iran developed the Buyback Contract, which it has applied on a number of oilfield investments. This is very similar to the risk service agreement, but is generally for a shorter period -- commonly 5 to 7 years of production (following 2-3 years of development) -- after which the state oil company becomes the operator of the project and keeps all revenue. The fee is paid in oil rather than cash and is calculated as a percentage of the capital invested. Thus the company obtains an agreed rate of return on its investment, provided a sufficient rate of production is achieved (although, again, the company carries the risk that little or nothing will be produced). Returns are generally 15-24%. In the late 1990s, Iraq under Saddam Hussein developed a new form of contract along similar lines, known as the Development and Production Contract. In this, a company would develop and operate an oilfield for a fixed period -- commonly 12 years. After that, operatorship would be passed to the state oil company, but with the foreign company providing services under a Technical Service Agreement (often for a further 15 years), during which the company also has a right to buy oil -- either at market price or at an agreed discounted rate.

All of these contract types limit the profits that can be extracted by foreign companies, so guarantee more effectively the state's income, and do not cede the same degree of sovereignty as PSAs.]

--

7. CONCLUSION

We have seen in the preceding chapters that, under the influence of the US and the UK, powerful politicians and technocrats in the Iraqi Oil Ministry are pushing to hand all of Iraq’s undeveloped fields to multinational oil companies, to be developed under production sharing agreements. They aim to do this in the early part of 2006. The results for Iraq would be devastating:

--Iraq would lose an enormous amount of revenue (making it conversely highly profitable for the foreign companies);

--The terms of the contracts would be agreed while the Iraqi state is very weak and still under occupation, but be fixed for 25-40 years;

--PSAs would deny Iraq the ability to regulate or plan its oil industry, leaving foreign companies’ operations immune from future legislation;

--PSAs would shift decisions on any disputes out of Iraq into international arbitration courts, where the Iraqi constitution, body of law and national interest are simply not relevant.

Yet, Iraq has other options for obtaining investment in its oil sector, including:

--Direct financing from government budgets;

--Government/state oil company borrowing; or

--Less damaging contracts with multinational oil companies, such as buybacks or risk service agreements.

These decisions should be made with the full participation of the Iraqi people, not in secret by unaccountable elites. Care should be taken not to take major irreversible steps that would later be regretted.

Getting these decisions right is vital for the future of Iraq.

[See original link for appendices on "How a Production Sharing Agreement works"; "Discounting in oilfield economics -- key concepts"; "Iraqi oilfield data"; and "Economic analysis -- methodology and assumptions."]

--PLATFORM is an interdisciplinary organisation working on issues of environmental and social justice. Founded in 1984, it specializes in addressing the impacts of British oil corporations on development, environment and human rights. http://www.carbonweb.org

U.S. CO-PUBLISHERS

--Global Policy Forum monitors policy making at the United Nations, promotes accountability of global decisions, educates and mobilizes for global citizen participation, and advocates on vital issues of international peace and justice. http://www.globalpolicy.org

--The Institute for Policy Studies strengthens social movements with independent research, visionary thinking, and links to the grassroots, scholars and elected officials. With an emphasis on the U.N. and the Middle East, IPS's New Internationalism Project works to strengthen the U.S. and global peace movements. http://www.ips-dc.org

--Oil Change International campaigns to expose the true costs of oil and facilitate the coming transition towards clean energy. We are dedicated to identifying and overcoming political barriers to that transition. http://www.priceofoil.org

U.K. CO-PUBLISHERS

--The New Economics Foundation (NEF) works to construct a new economy centred on people and the environment. Founded in 1986, it is now one of Britain’s most creative and effective independent think tanks, combining research, policy, training, and practical action. http://www.neweconomics.org

--War on Want is a U.K.-based campaigning charity. Founded in 1951 it has links to the labor movement and supports progressive, people-centred development projects around the world. War on Want campaigns in the U.K. against the causes of world poverty. http://www.waronwant.org